Effective Jan. 1, 2017, ON Semiconductor began recognizing revenue at the time it ships products to distributors with appropriate provisions for future price adjustments and returns (the “sell-in” method).
Prior to transitioning to the “sell-in” method, the Company utilized the “sell-through” method pursuant to which it deferred the recognition of revenue until distributors reported that they had sold the Company’s products to end customers. The Company historically has utilized the “sell-through” method due to its inability to reasonably estimate the provisions for future price adjustments and returns necessary for “sell-in” revenue recognition. As a result of improvements in the Company’s systems and processes for sales in to the distribution channel implemented during the first quarter of 2017, the Company concluded that it is now able to reasonably estimate returns and pricing concessions such as ship and credit rights.
As a result of the change in the Company’s revenue recognition methodology, revenues for the first quarter of 2017 included a one-time adjustment, which has been excluded from the Company’s non-GAAP revenues in the table under the heading “First Quarter Results (non-GAAP).”
Definitions of the non-GAAP measures used in this release and reconciliation of non-GAAP financial measures used in this release to the Company’s most directly comparable measures prepared in accordance with GAAP are set forth in the attached schedules and on our website at http://www.onsemi.com. Additional information on revenue by end-market, region, distribution channel, business units and share count can be found on the “Investor Relations” section of our website.
SECOND QUARTER 2017 OUTLOOK
Based on product booking trends, backlog levels, and estimated turns levels, the Company anticipates that total revenue will be approximately $1,285 to $1,335 million in the second quarter of 2017. Backlog levels for the second quarter of 2017 represent approximately 80 to 85 percent of anticipated second quarter 2017 revenue. The outlook for the second quarter of 2017 includes anticipated stock-based compensation expense of approximately $20 million to $22 million. Net cash paid for income taxes is expected to be $12 million to $16 million.
The following table outlines ON Semiconductor’s projected second quarter of 2017 GAAP and non-GAAP outlook.
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Total ON Semiconductor
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Special
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Total ON Semiconductor
Non-GAAP**** |
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| Revenue | $1,285 to $1,335 million | $1,285 to $1,335 million | ||||||||
| Gross Margin | 34.5% to 36.4% | 0.2% to 0.3% | 34.7% to 36.7% | |||||||
| Operating Expenses | $311 to $332 million | $30 to $37 million | $281 to $295 million | |||||||
| Other Income and Expense (including interest expense), net | $35 to $38 million | $8 to $9 million* | $27 to $29 million | |||||||
| Diluted Share Count ** | 427 million | 427 million | ||||||||
| * |
Convertible Notes, Non-cash Interest Expense is calculated pursuant to FASB’s Accounting Standards Codification (“ASC”) Topic 470: Debt. |
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| ** |
Diluted share count can vary for, among other things, the actual exercise of options or vesting of restricted stock units, the incremental dilutive shares from the Company’s convertible senior subordinated notes, and the repurchase or the issuance of stock or convertible notes or the sale of treasury shares. In periods when the quarterly average stock price per share exceeds $18.50, the non-GAAP diluted share count and non-GAAP net income per share includes the impact of the Company’s hedge transactions, issued concurrently with our 1.00% convertible notes. As such, at an average stock price per share between $18.50 and $25.96, the hedging activity offsets the potentially dilutive effect of the 1.00% convertible notes. In periods when the quarterly average stock price per share exceeds $20.72, the Non-GAAP diluted share count and non-GAAP net income per share includes the anti-dilutive impact of the Company’s hedge transactions, issued concurrently with the 1.625% convertible notes. As such, at an average stock price per share between $20.72 and $30.70, the hedging activity offsets the potentially dilutive effect of the 1.625% Notes. |
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| *** | Special items may include: amortization of acquisition-related intangibles; expensing of appraised inventory fair market value step-up; purchased in-process research and development expenses; restructuring, asset impairments and other, net; goodwill impairment charges; gains and losses on debt prepayment; non-cash interest expense; actuarial (gains) losses on pension plans and other pension benefits; and certain other special items, as necessary. These special items could change significantly and are subject to swings from period to period. As a result, we are not able to reasonably estimate and separately present the individual impact of these special items. For this reason, we use a projected range of the aggregate amount of special items in order to calculate our projected non-GAAP operating expense outlook. | |||
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We believe these non-GAAP measures provide important supplemental information to investors. We use these measures, together with GAAP measures, for internal managerial purposes and as a means to evaluate period-to-period comparisons. However, we do not, and you should not, rely on non-GAAP financial measures alone as measures of our performance. We believe that non-GAAP financial measures reflect an additional way of viewing aspects of our operations that, when taken together with GAAP results and the reconciliations to corresponding GAAP financial measures that we also provide in our releases, provide a more complete understanding of factors and trends affecting our business. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures, even if they have similar names. |
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